NEW YORK (CBS/AP) -- U.S. stocks plunged on Monday, marking a second day of trading that generated steep declines, amid fears of rising inflation and potential rate increases by the Federal Reserve.
The Dow Jones Industrial Average plunged 1,175.21 points, or 4.6 percent, closing at 24,345.75.
Earlier in the afternoon, the index declined more than 1,500 points before recovering slightly. Even though it marks the biggest point drop in history, the market's decline is far from the largest on a percentage basis. The largest historic percentage drop was on Oct. 19, 1987, when the market plunged more than 22 percent.
The two-day losing streak, in which the Dow dropped 666 points on Friday, was sparked by a pickup in wages, which could usher in higher inflation. Average hourly earnings, which had been rising at a modest 2.5 percent in the recovery, increased by 2.9 percent from the year before, the Labor Department said on Friday.
Some sectors also showed weakness, including banks following the punitive action by the Federal Reserve against Wells Fargo.
The two-day slump wiped out the stock market's gains this year. Investors are concerned that the recent period of low inflation and low interest rates may be coming to an end. Higher borrowing costs could eat into corporate profits, while also slowing down the market for houses, cars and other items bought using credit.
"Following Friday's wage data markets are coming to the conclusion that the U.S. economy is close to overheating and therefore that the risks of inflation are bigger than the risks of a recession," noted Torsten Sløk, chief international economist at Deutsche Bank Securities.
Before Monday, the biggest one-day drop in the Dow was on Sept. 29, 2008, when the index plunged 777.68 points, or about 7 percent.
Wells Fargo dropped 9.2 percent Monday after the Fed hit the bank with new penalties over a scandal that involved opening millions of phony consumer accounts.
Energy companies were also moving lower as the price of crude oil slipped. Exxon Mobil fell 5.7 percent, making it the second-biggest loser in the Dow Jones on Monday, after Boeing.
Other indices also declined. The Nasdaq composite lost 273.42, or 3.8 percent, to 6,967.53. The Standard & Poor's 500 index fell 97.92, or 3.55 percent, to 2,664.21, with the energy sector leading losses that included nine of 10 major industry groups.
Bank shares and energy companie slid on Monday, although losses were widely felt. Amazon, whose stock has soared in the past year, declined 2.8 percent.
The market is coming off its worst week in two years. Stocks fell sharply on Friday as traders worried about inflation and rising interest rates. Before the sell-off, some economists and stock market analysts had predicted a market correction given the high valuation of the equity market.
"Market corrections are normal, no matter how nerve-wracking they are at the time. Just hang in there, maintain a long-term perspective and resist the urge for any knee-jerk reactions," said Bankrate.com's chief financial analyst Greg McBride.
The slide was fueled by the release of January's jobs report on Friday that showed wages growing at their healthiest pace in years, with investors now expecting inflation to pick up, leading to higher interest rates and corporate borrowing costs.
"If there is one thing stocks hate is a rising rate environment," wrote Paul Nolte, a senior vice president and portfolio manager at Kingsview Asset Management. "The markets will be having a rough couple of weeks as it assimilates the 'new' normal," he added of expectations the Fed would not be hiking rates faster than the previously expected three times.